1. Financial institutions in the U.s. economy Suppose Darnell would like to inve
ID: 2548017 • Letter: 1
Question
1. Financial institutions in the U.s. economy Suppose Darnell would like to invest $6,000 of his savings. One way of investing is to purchase stock or bonds from a private company. Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab-a practice known asfinance. Buying a bond issued by NanoSpeck would give Darnell the firm. In the event that NanoSpeck runs into financial difficulty, will be paid first. Suppose instead Darnell decides to buy 100 shares of NanoSpeck stock Which of the following statements are correct? Check all that apply. Expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of Darnell's shares to decline. An increase in the perceived profitability of NanoSpeck will likely cause the value or Darrers shares to rise. The price of his shares will rise if NanoSpeck issues additional shares of stock. Alternatively, Darnell could invest by purchasing bonds issued by the U.S. government. interest rate than a Assuming that everything else is equal, a U.s. government bond that matures 10 years from now most likely pays a U.S. government bond that matures 30 years from nowExplanation / Answer
Suppose NanoSpeck, a biotechnology firm, is selling bonds to raise money for a new lab—a practice known as debt finance. Buying a share of NanoSpeck stock would give Darnell an IOU, or promise to pay, from the firm. In the event that NanoSpeck runs into financial difficulty, Darnell and the other bondholders will be paid first.
The followings will Apply:
-Expectations of a recession that will reduce economy-wide corporate profits will likely cause the value of Sean's shares to decline.
-An increase in the perceived profitability of RoboTroid will likely cause the value of Sean's shares to rise.
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